OPEC production cuts could benefit New Mexico

This Feb. 25, 2015, photo, shows a pump jack for pulling oil from the ground, near New Town, N.D. On Tuesday, Nov. 8, 2016, the Energy Department said it is raising its forecast of U.S. production for both 2016 and 2017, as drillers respond to higher crude prices. Still, output won’t match 2015, which was the biggest year for U.S. production in 35 years.(Photo: Matthew Brown/The Associated Press)

Oil and gas experts in New Mexico are hopeful that production cuts by the Organization of Petroleum Exporting Countries will have a positive impact on the state's industry.

OPEC-member nations agreed Wednesday to reduce production by 1.2 million barrels a day after record production levels caused a supply glut, driving the world price of oil below $30 earlier this year.

Russia, which is not part of OPEC, agreed to cut their production by 300,000 barrels a day.

Oil prices have been steadily rising since the news broke with West Texas Intermediate (WTI) sitting at $50.91 a barrel on Thursday afternoon, up more than $5 from Wednesday.

"OPEC said this and it moved the market, there's no question," said Wally Drangmeister, vice president of the New Mexico Oil and Gas Association. "The fact that the oil price is up as a result of that is very positive for the industry in New Mexico."

Drangmeister and others in the industry have expressed guarded optimism, however, as OPEC has announced production cuts before and not followed through.

The increased price is welcome, Drangmeister said, but will be most beneficial to the state if it lasts a few months.

"If it holds for a period of time, it's possible we could see a few more drilling rigs operating in southeast New Mexico," Drangmeister said. He said the announcement may also accelerate the completion of unfinished wells in New Mexico.

New Mexico's well count started in November at 32 but was at 29 by the end of the month, according to Baker Hughes.

Drangmeister said the rig count in the coming months will be a good indication of the impacts being felt from the cuts.

Some have said that the gap left by OPEC's cuts may be filled by the U.S. industry continuing the glut and causing prices to drop again.

U.S. Rep. Steve Pearce, a strong proponent of the state's oil and gas industry, expressed optimism at the news as well.

"Higher oil prices and increased production in New Mexico will not only help the national economy, but will add much needed revenue to the state budget, aiding everything from schools to hospitals in our state," Pearce said in a news release Wednesday. "...Today's production cut is a realization by OPEC that the American energy revolution is real, and our nation's oil industry can drive the global market."

Maddy Hayden may be reached at 575-628-5512, mahayden@currentargus.com and @Maddy_J_Hayden on Twitter.